Everybody, as usual, is all mad at the police. They should use their discretion better! Surely this was a mistake!

Had a talked with La Skarbek yesterday at a reception, on just this question. It is WRONG to criticize the police. If you want a police state, with a bunch of intrusive laws, this is what you get. It is not an abuse of power, it is just the fact of power. Saying "that's not what we meant!" after the fact is idiotic. If you don't want to go to Chicago, don't get on that train.

The following items will not be allowed through the security checkpoint. Please note that this list is not all-inclusive. In addition to items specifically listed here other items that may be deemed to present a potential threat may also be prohibited. ...
Replica weapons
...
Toy transformer robots (this toy forms a toy gun)
Toy weapons

That thing, on her purse: that is a three dimensional gun. It is not a design. It is a glued on plastic piece. Is the TSA stupid for preventing it?

No, the law is stupid for outlawing it. I believe that TSA actually promulgated this regulation, but I could not easily find the underlying statute.

Here is an actual video, used at Glacier International Airport in Montana. Imagine if you had to work all day in security, and heard this several hundred times. You would be WISHING you had a gun so you could kill yourself.
I like when the guy cuddles the metal detector.

You know, by saying things like since the tax surcharge only applies to the income ABOVE $1,000,000, all the income BELOW $1,000,000 is not affected and so incentives for these people won't change much.

The argument about tax rates and incentives is a MARGINAL argument. We presumably want the economy to expand, so the question is how does increasing taxes on the marginal earnings of these "most fortunate Americans" affect their future behavior?

At the margin, for people already making $1,000,000 changes in the tax rate on incomes higher than $1,000,000 have a full effect on the incentives of these people. The effect on their incentives to undertake further economic activity (expand their business, work more themselves) is NOT mitigated by the fact that the tax rate has not risen on the income they are already making!!

If you make $999,999 the tax increase would not affect your current liabilities under your current business plan. That is clearly true. But it does fully affect any decisions by such a person about future actions.

If we want to sock it to these "most fortunate Americans", by all means let's do. But let's not think that the fact that it's a marginal tax rate increase means that it will have an attenuated effect on their future economic activity.

PS: another bogus argument is to refer to the proposed increase as a "modest 3.25 percent surcharge". It's a 3.25 percentage point increase. If the current top rate is 35%, then the proposal is actually a 9.3% surcharge.

Hey Treasury department: Do what you want to do. Just stop lying about what it is you are doing!

I find that reading Kenneth Arrow's articles takes me a while. They are usually very dense and closely reasoned. But once I have read them I feel like I have learned something.

This "article" is something else entirely. A truly remarkable claim:
The notion of a well-running market is applicable to manufactured goods; different items are produced to be alike and can be evaluated by consumers. But the products of the finance and health industries are individualized and complex. The consumer cannot seriously evaluate them—a situation that economists call “asymmetric information.”

This casts light on the claim that the problem is one of personal ethics, of greed. After all, the search for improvement in technology, and consequently in the general standards of living, is motivated by greed. When the market system works properly, greed is tempered by competition. Hence, most of the gains from innovation and good service cannot be retained by the providers.

But in situations of asymmetric information, the forces of competition are weakened. The individual patient or financial client does not have access to all the relevant information. Indeed, when the information is sufficiently complex, it may be impossible to provide adequate information.

If Prof. Arrow is correct, and he may be, then we are left with two choices. We can recognize that information is asymmetric, scarce, and difficult to obtain, and warn consumers to be careful. Or we can assume, as Prof. Arrow does, that the government can solve this problem completely and insulate people from all risk.

That is what happened in 2007, in a nutshell. Everyone thought that regulation had solved the asymmetric information problem, and they were free to invest without risk.

Regulation makes the problem worse, not better. Government has no special ability to obtain information, and has no particular incentive to provide the information it does have, since Wall Street firms use campaign contributions dominate the oversight committees. If anything, the oversight committees in Congress are simply wholly owned subsidiaries of Goldman-Sachs et al.

What makes this so upsetting is that the poor buyers were duped into believing that since the system was regulated it must be safe. All the people I know who lost heavily in the market in 2007 were lefties, secure in the knowledge that their government was there to help them. People like me saw that the risk was unsupportable, and pulled out.

Thursday, December 01, 2011

So, here are the four podcasts from the PE lecture series from this fall. I put the name of the speaker, linked to his web page, and then a link to the podcast (in every case, an MP3). The sound quality is not always very good, because I was both the person in charge of recording and also the editor of final product.

Remember, the course that these podcasts come from is "Economics for Non-majors," a new but now permanent course being taught at Duke. (Syllabus for Fall 2011). Let me acknowledge the extremely helpful assistance of the Charles G. Koch Foundation and the Thomas W. Smith Foundation in getting this off the ground. We could not have done it without you, folks! There was nothing like this, and now there is a new permanent course, right here at Duke University. It will be offered at least twice a year from now on.

Wednesday, November 30, 2011

Every day that the Eurozone continues to exist, things just get worse. We hear a lot about how terrible the breakup of the common currency will be for everyone, and I agree it will be bad. But people, there are only bad options left. There is no happy way out of here.

The PIGS need, above all, economic growth. Due to the public choice problems that LeBron has recently enumerated, I believe the fastest route to increased growth for them is default and devalue. Let Argentina be your guide.

What "reforms" is Germany going to dictate to the PIGS that will raise growth over the next 3-5 years?

Run free little PIGS, and let the ECB or the individual central banks of France and Germany worry about being LOLR to their crazy banks who believed that Greece had turned into Germany.

"Far more than in Europe, most Americans remain instinctively loyal to the killer applications of Western ascendancy, from competition all the way through to the work ethic. They know the country has the right software. They just can’t understand why it’s running so damn slowly. What we need to do is to delete the viruses that have crept into our system: the anticompetitive quasi monopolies that blight everything from banking to public education; the politically correct pseudosciences and soft subjects that deflect good students away from hard science; the lobbyists who subvert the rule of law for the sake of the special interests they represent — to say nothing of our crazily dysfunctional system of health care, our overleveraged personal finances, and our newfound unemployment ethic. Then we need to download the updates that are running more successfully in other countries, from Finland to New Zealand, from Denmark to Hong Kong, from Singapore to Sweden. And finally we need to reboot our whole system. I refuse to accept that Western civilization is like some hopeless old version of Microsoft DOS, doomed to freeze, then crash. I still cling to the hope that the United States is the Mac to Europe’s PC, and that if one part of the West can successfully update and reboot itself, it’s America." [Niall Ferguson, Newsweek]

The course has been very fun to teach. Just started it up (this is the second time around), and it has 80 students in the second semester. (That's a pretty big class for Duke....) The "real" sciences all have courses for non-majors, and I have noticed that a lot of students duck Econ because it has too much math. But it's REALLY important (or so Angus insists).

I'll post the four podcasts (John Lewis, Classics; William Gradison, US House and PCAOB; Timur Kuran, Economics; and Kevin Grier, Economics) next week. They were all REALLY good, and I'm sure Angus will be the cherry on top of my sundae of life, as always.

(Angus is flying in tonight. A little trouble, though, because Ms. Angus screwed up his reservations. Okay, no she didn't: Angus got a little confused about the admittedly complex concepts of "before" and "after." But it's all good. The LMM has made a lovely gluten-free chocolate cake in anticipation of arrival d'Angus)

but I keep finding them! Bob Shiller continues his relentless march deeper and deeper into the NY Times Sunday Business Section, but I ferreted his column out on page 8!

Lets take a quick sample:

THE failure of the Congressional supercommittee to come up with any agreement on the budget deficit makes it even less likely that Congress will rise above its partisan divisions and act on behalf of the millions of out-of-work Americans.Yet without government intervention, we may well have high unemployment and social discord for years to come. How did this disaster happen?

Let's blow right by the supercommittee non-sequitor and focus on the second sentence: without government intervention.

YIKES.

He doesn't say "without FURTHER intervention"; he acts like nothing has been done!

Hey Bob, lets take a peek at the Fed's balance sheet:

No government intervention? Dude!

How about on the fiscal side?

Since 2007, We've more than tripled the Fed's balance sheet and more than tripled the Federal deficit. I think that qualifies as a fair amount of "government intervention" (am I weird to think that when automatic fiscal stabilizers kick in that counts as government intervention?).

Yes, long term unemployment is a big problem in this country. Will another $400 billion "jobs" program solve it or even noticeably reduce it? Will another round of quantitative easing solve it?

Sunday, November 27, 2011

This Thursday, in a parish hall not far from the New Jersey town green where George Washington once made his winter headquarters, as many as 300 people will gather for their Thanksgiving meal. Some will be homeless, some will be mentally ill, some will be old, and some will be folks and families who have just hit a hard patch. For all of them, Morristown's Community Soup Kitchen and Outreach Center is one of the few blessings they can count on...This the men and women of the Community Soup Kitchen have provided for 26 years, not once missing a day. Now comes a challenge greater than any snowstorm or power outage. Earlier this year, the Morristown Division of Health ruled that henceforth the soup kitchen would be considered a 'retail' food establishment under New Jersey law...Most obvious is the higher cost: at least $150,000 more a year...Much of this cost results from a new prohibition on people donating food they've prepared at home. For those on the giving end, often this was the only way they could participate, so eliminating their contributions means eliminating volunteers. For those on the receiving end, it means no more homemade meat loaf, lasagna, cakes and so forth. All, of course, in the name of food safety. Still, one suspects that when a co-worker brings a tin of Christmas cookies to a friend inside Morristown's Division of Health, those cookies are not forbidden because they do not come wrapped from a supermarket or approved restaurant...In the 26 years this kitchen has been open, there seems to be no case of food poisoning. [William McGurn, WSJ op-ed]

The passage in yellow is the one I think is interesting. Presumably the Morristown Health Gestapo has potlucks, or during the "holiday season" someone brings in some homemade goodies. And I bet the folks at the MHG do NOT throw the stuff out.

One could say that the food brought to the office is informal, and is not for sale. Right. That's the correct distinction: since the food at the Soup Kitchen and Outreach Center is NOT FOR SALE, it should have a separate category. Not exempt, perhaps (though, why not? The Morristown Health Stasi is exempt, apparently!), but a different category. If you don't sell food, or anything else, you can accept donations of cooked food.

If it turns out there are health problems, ex post, the shut them down. But the idea that you are going to protect poor people by denying them something to eat is pretty strange.

As Mr. McGurn notes in closing (since the piece is gated, you may not have read it): Hillary Clinton visited an orphanage run by Mother Teresa's nuns. She came away impressed by the great love and care she found there. With no small irony, she noted it was a place that "would not have passed inspection in the U.S."

Look, folks, we can't blame the food police. It's the LAW. Get rid of the law. I don't fault the police, cause the people that run 'em got 'em on a short leash.

Okay, I enjoy the video and all. But why the "MSNBC" label at the end? Are they making campaign videos now? Turns out that yes, that is exactly what "Lean Forward" is all about.

Fine with me if they are. But the bald abandonment of any pretense of objectivity (MSNBC long ago abandoned objectivity, but they have maintained the pretense) is impressive. As the NYTimes (a pretender of great talent!) says that MSNBC has "embraced a political identity" I guess they know what they are talking about.

Have to wonder about the title they picked. "Lean Forward, America!" sounds a lot like "Bend Over, America!" And that's pretty much what the MSNBC campaign to reelect the President sounds like: bend over, America, and yes you CAN have another.

Abstract:
This article presents findings from a recent worldwide study of archaeological site looting, which largely fuels the international trade in illicitly obtained antiquities. Focused on practicing archaeologists’ opinions about and personal experiences with site looting, the study surveyed 2,358 archaeologists excavating throughout the world in 118 countries. Key findings presented here include archaeologists’ reports of connections between archaeological site looting and the production of and trade in methamphetamine across the United States. American archaeologists report run-ins with “meth heads” on their sites with increasing frequency. Other archaeologists working throughout the world report violent encounters with looters on site, some of whom even report being shot at and assaulted by looters. Overall findings suggest that archaeological fieldwork has become an increasingly dangerous occupation around the world.